T-Mobile US Gets Offer from Iliad for $15 Billion

A French telecom company roughly 1/6th the size of T-Mobile US (in revenue and about 1/2 by market cap), by the name of Iliad has just put up an offer to buy 56% of T-Mobile US for an approximate $15 billion in cash. This would theoretically still leave some shares of T-Mobile US in Deutsche Telecom’s hands, but would mostly wash them of the company and give them cash (instead of a mixture of cash and shares, which is what Sprint is supposedly offering). As of right now, there are still no official figures for the T-Mobile/Sprint merger deal, so we don’t exactly know what T-Mobile is thinking or whether or not there is a better offer from Sprint. Since the announcement of the deal, I have been advocating that Sprint’s initial offer was too low for a competitor that is technically eating their cake and growing very competitively.

Iliad’s offer comes from their founder and CEO, Xavier Niel, who’s decision was unanimously approved by the company’s board. Iliad believes that because of their absolute and complete non-existence in the US market, they will not be subject to the regulatory scrutiny that other deals might have. For Deutsche Telecom and T-Mobile US, an Iliad deal would be much more straightforward and would very likely change very little in terms of how T-Mobile US is run. If T-Mobile US were to merge with Sprint, however, things would undoubtedly change and there would only be 3 carriers in the US, not 4. And there would be a lot of complexity and problems with unifying Sprint’s and T-Mobile’s networks on such a large scale. Especially considering how much trouble Sprint has had upgrading their network.

It remains to be seen whether or not T-Mobile’s board will even look at this deal, but I have a feeling that a lot of T-Mobile shareholders are going to look at it positively. Since the announcement, T-Mobile US’ shares have been up 5%, which would mean that investors are happy with this offer or at least that a second competing offer exists. Iliad’s offer isn’t really worse than Sprint’s, yes it does offer less money, but it offers more cash and more freedom to compete and operate independently. If absorbed into the Softbank/Sprint monster, there’s going to be a lot of job trimming (in Sprint and T-Mobile) and there will be less competition, no matter what Softbank’s CEO says. Fewer competitors almost always results in less competition, I simply don’t think anyone can argue that Sprint and T-Mobile together will be more competitive than T-Mobile is right now. Sure, they’ll be bigger and capable of generating more profit from economies of scale, but who says T-Mobile can’t get there by simply being continuing to be competitive?